Understanding Appraisals

Acquiring a house is the most serious investment some will ever consider. It doesn't matter if a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

Practically all the parties involved are quite familiar. The most known face in the exchange is the real estate agent. Then, the lender provides the money necessary to bankroll the deal. And ensuring all aspects of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Hart Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Hart Appraisal Services is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we pull information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Hart Appraisal Services, we are experts in knowing the worth of particular items in Highlands Ranch and Douglas County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the property yields is factored in with income produced by comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Hart Appraisal Services will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.